Docstoc

Boards Overview

Document Sample
Boards Overview Powered By Docstoc
					SWT                                        JUNE RETURN 2002


BOARD’S OVERVIEW


Chapter 1 Key Outputs and Service Delivery – (Tables A and B)

Chapter 2 Expenditure and Financial Performance Measures - (Table C)

Chapter 3 Key Supporting Information - (Tables D and E)

Chapter 4 Efficiencies

Chapter 5 Competition

Confidentiality

Board Endorsement




Page: 1
Date Stamp: 4 March 2010       Time Stamp: 21:29
SWT                                             JUNE RETURN 2002


BOARD OVERVIEW

For much of the year, events were dominated by the severity of the Foot and Mouth
outbreak that curtailed or restricted activities in large areas of the South West.
Nevertheless, we were still able to achieve delivery of a further 87 waste water quality
schemes and a record length of rehabilitated mains.

Drinking water quality attained a new all time high and the best ever bathing water
quality results were also achieved.

Leakage levels were again controlled inside the Ofwat target, and all DG service levels
were either maintained or improved further.

Market research results continued to confirm high levels of customer satisfaction with
the overall service provided by the Company.




Page: 2
Date Stamp: 4 March 2010          Time Stamp: 21:29
SWT                                              JUNE RETURN 2002



CHAPTER 1

WATER SERVICE - KEY OUTPUTS AND SERVICE DELIVERY

Drinking Water Quality

Overall drinking water quality, at 99.88% for calendar year 2001, is now at an all time
high.

We have also improved our OP Index score from 99.47% to 99.50%. Further
improvements in this measure continue to be dependent on progressive delivery of the
Company‟s mains rehabilitation programme which was scheduled by Ofwat for later
delivery than in most other regions due to the magnitude of the waste water quality
programme in the South West and its impact on prices.

Mains Rehabilitation

For much of the year our mains rehabilitation programme was severely affected by the
Foot and Mouth outbreak, with 46% of our mains network being located inside the
restricted access boundary. As a consequence, we have agreed revised milestone
completion dates with the DWI.

Despite these exceptional difficulties, the length of mains replaced or relined was higher
than for 2000/01 at 260 kilometres.

This investment area was significantly under-funded in the 1999 Determination by some
30%. We are continuing to focus on delivering milestone compliance dates agreed with
the DWI to maximise outputs.

Leakage

For the third year running, we have met or exceeded our target of restricting overall
leakage levels to less than 84 Ml/day.

Analysis undertaken prior to JR01 showed that the economic level of leakage was likely
to be significantly higher than that already being achieved.




Page: 3
Date Stamp: 4 March 2010           Time Stamp: 21:29
SWT                                             JUNE RETURN 2002



DG2 – Water Pressure

Only 0.04% of properties are now below the reference level, for the second year
running. This represents a ten-fold improvement since 1997/98.

Further evidence on some properties removed from the register will be supplied to the
Reporter in the year ahead.

DG3 – Supply Interruptions

Overall performance on unplanned interruptions improved noticeably from 0.69 last year
to 0.49 in the reporting year.

At Saltash near Plymouth a burst on the strategic main affected 662 (0.1%) of our
connected properties

DG6 and DG9 - Billing and Telephone Contacts

DG6 performance was maintained at 100% while DG9 showed a further improvement at
over 95%.

The total number of billing and telephone contacts was down on 2000/01, despite a
steady increase in the number of metered accounts. The majority of customer calls are
resolved by an agent at the first point of contact during that call. Only 2 contacts took
longer than 5 days to resolve. Of the total number processed, 86% were dealt with
inside 2 days.

The Company is committed to improving both its standards of service and its relationship
with customers. The consistent trend of year-on-year improvement is due to continued
focus on customers and further improvements in the quality of information supplied to
them. Our twice-yearly newspaper Waterlevel is widely read and seen as helpful by
customers, as evidenced by research results. Information has been provided on the
Guaranteed Standards Scheme, Enhanced Guaranteed Standards Scheme and
Customer Charter.

DG7 Written Complaints

Performance was maintained at 99.9%.


Page: 4
Date Stamp: 4 March 2010          Time Stamp: 21:29
SWT                                             JUNE RETURN 2002



The number of written complaints has fallen by 9% since 2000/01 and by 50% since
1997/98, against a customer base that is growing by 1% per annum. This indicates an
improvement in customer service with fewer customers feeling the need to write formally.


Fully documented internal quality audits have been carried out during the report year.
We shall continue this process in the year ahead.

DG8 - Bills for metered customers

Performance was maintained at 99.9%, despite a 13% increase in the number of
metered accounts

This is an exceptionally high standard of performance in the South West region which
has a high proportion of holiday homes, where access is consequently difficult to
arrange.

SEWERAGE SERVICE - KEY OUTPUTS AND SERVICE DELIVERY

Bathing Water Compliance

In November, DEFRA and the Environment Agency confirmed that the Region‟s bathing
waters and beaches were cleaner than they have ever been before. In 2001, 137
beaches out of 140 passed imperative standards, which is nearly 98% mandatory
compliance. One hundred beaches (71%) also passed the tighter guideline compliance
standard (the best performance of any region in the UK for the higher standard).

River Water Quality

A recent Government report on the quality of the nation‟s watercourses highlighted the
fact that Devon and Cornwall has more miles of high quality rivers than any other region
in England. Since 1989, we have improved treatment standards at over 250 waste
water treatment works, greatly improving the quality of treated waste water entering the
region‟s rivers. This has provided a major contribution to the improvement in river water
quality.




Page: 5
Date Stamp: 4 March 2010          Time Stamp: 21:29
SWT                                             JUNE RETURN 2002



Foot and Mouth Crisis - Operational Impact

The Company played a key role in managing the Foot and Mouth crisis in the South
West. We supported the farming community by receiving waste from 2 strategically
important rendering plants that required the resultant sludges to be landfilled. We also
provided temporary water supplies to some 250 farms via bowsers and co-operating
with the regime imposed in the restricted zones. Our contribution was recognised by
DEFRA in their December letter to Ofwat acknowledging the considerable operational
difficulties that had been caused to the Company by the crisis and stating that the
Devon outbreak could not have been contained without SWW assistance.

Waste Water Compliance

Waste water compliance was significantly affected by the Foot and Mouth crisis and the
Company‟s participation in its management, although there were no environmental
impacts on river or bathing water quality. As well as additional sludge volumes and
increased return liquors with high biological and ammonia strength, short term
enhanced sludge treatment was put in place to satisfy perception issues on the re-
commencement of sludge recycling to agricultural land.

Access restrictions resulted in reduced sampling frequency and operational visits, with
the acknowledgement of the Environment Agency. Subsequently, the Environment
Agency‟s use of reduced numbers of available sample results and their refusal to allow
a recovery period for works following the crisis, has resulted in the population served by
non-compliant works being stated at more than 11%. We have provided detailed
evidence to the Environment Agency showing that the level of non-compliance would
have been 1.63%, a lower figure than for 2000/01, if Foot and Mouth impacts had been
excluded.

Continuous Discharges

Major schemes were completed during the year at Torbay, Plymouth and
Camborne/Redruth.

In total, 32 continuous discharge schemes were delivered in 2001/02, adding to the 9
schemes completed in 2000/01.




Page: 6
Date Stamp: 4 March 2010          Time Stamp: 21:29
SWT                                               JUNE RETURN 2002


The total equivalent population served by NEP sewage treatment works improvements
is 288,000 (almost 19% of the connected population).

At March 2002 a net 8 schemes were incomplete due to foot and mouth, land
acquisition and planning delays; 4 of these are now scheduled for delivery by the end of
June.

Intermittent Discharges

The Company has completed a further 55 intermittent discharge schemes on the NEP
list, reducing the total of unsatisfactory discharges requiring improvement from 286 to
231.

At March 2002 a net 6 schemes were overdue, 4 of which are now scheduled for
delivery by the end of June.

DG5 – Properties at risk of Flooding

As at March 2001 there were 63 properties at risk of flooding twice in 10 years and 182 at
risk once in 10 years. In total, the Company‟s „at risk‟ register represented 0.038% of
connected properties, compared to a figure of 0.116% nationally.

We removed 27 properties from the DG5 Register in the reporting year, but added 26
new properties. Our DG5 Register only has properties that have actually flooded; there
may therefore continue to be additions to the Register due to the statistical distribution of
rainfall events based on a 1 in 10 years rainfall event.




Page: 7
Date Stamp: 4 March 2010            Time Stamp: 21:29
SWT                                             JUNE RETURN 2002



CHAPTER 2 - FINANCIAL PERFORMANCE MEASURES

Turnover
Appointed business turnover for the year increased by 3.9% to £253.0m. Turnover
from main water and sewerage charges was £247.8m (2001 £239.6m).

The effect of meter option switchers was to reduce turnover by £4.3m, £0.4m less than
in 2001.

Operating Costs
Total appointed business operating costs, including depreciation, rose from £141.0m to
£149.2m. Operating efficiencies of £4.0m made a strong contribution to offsetting
additional costs, mainly arising from increased depreciation and operating costs from
new and improved works (£7.2m) and specific “one-off” factors including the impact of
the Foot and Mouth epidemic (£1.6m).

Operating costs, before depreciation, were £92.9m (2001 £89.7m), an increase of
£1.9m after inflation,

Profit

Historic cost operating profit was £104.6m (2001 £104.0m).

Net interest payable fell marginally to £40.2m (2001 £40.3m), reflecting lower interest
rates, offset by funding required for the Capital Expenditure Programme.

Net profit before taxation amounted to £65.0m (2001 £64.3m).

The Appointed business's taxation position results in a charge to mainstream
corporation tax of £2.1m (2001 credit of £0.6m) for the year. This position reflects the
continuing capital allowances generated by the capital expenditure programme and the
continuing benefits delivered from the policy of disclaiming capital allowances in order
to utilise surplus advance corporation tax.

The Company‟s accounting policy on deferred taxation has been amended following
adoption of FRS19, which requires full provision to be made for deferred taxation
arising from timing differences between recognition of gains and losses in the financial


Page: 8
Date Stamp: 4 March 2010          Time Stamp: 21:29
SWT                                              JUNE RETURN 2002


statements and their recognition in a tax computation. Previously the Company‟s
accounting policy was to provide for deferred taxation to the extent that it was likely to
crystallise in the foreseeable future, which resulted in no provision for deferred taxation
being recognised at 31 March 2001.

The effect of the change in accounting policy is a charge for deferred tax of £2.0m in
the current year and a charge of £18.0m in 2000/01.

In addition, the Company‟s presentation of its defeased lease arrangements has been
amended following adoption of FRS18. In order to improve understanding and
comparability with other utilities, the rental obligations and cash deposits associated
with these leases have now been recognised on the balance sheet. This has no
material impact on reported profit in 2001 or 2002.

Dividends

Dividends totalling £66.7m (2001 £60.4m) were declared to the parent undertaking.

The Company has established a dividend policy, which involves the following
components:

     - a sustainable level of base dividend growth, determined by a number of factors
       including the shareholder‟s investment and the cost of capital.

     - a further level of growth funded by efficiency out-performance.

     - consistency with the assumptions made by Ofwat in setting prices for the
       K3 period.

Dividend payments ensure that key financial ratios are not prejudiced and that the
ability of the Appointee to finance its Appointed Business is not impaired. The dividend
for 2001 was reduced from previous levels to accord with the lower level of profits
resulting from the Director General‟s price reductions and assumptions made in setting
prices.

A deficit of £5.8m (2001 Restated £13.5m) was transferred from reserves after charging
the interim dividend.




Page: 9
Date Stamp: 4 March 2010           Time Stamp: 21:29
SWT                                               JUNE RETURN 2002


Cash Flow

Net cash inflow from operating activities decreased to £157.1m (2001 £162.2m), mainly
as a result of increased debtors and prepaid expenses.

£164.5m was applied to capital investment (2001 £138.5m).

After allowing for financing costs, the decrease in cash in the year was £25.1m (2001
£10.1m)

Financial Ratios

Financial ratios for 1999/00 and 2000/01 have been restated to reflect the changes in
accounting policy following the adoption of FRS 18 and FRS 19.

                                         99/00           00/01          01/02
                                         Restated        Restated
Historic Cost Dividend Cover             1.5             0.8            0.9
Current Cost Dividend Cover              1.5             0.8            0.9
Gearing                                  33.6%           40.0%          44.1%

Financial needs and resources
Significant funding facilities exist for both the medium and long term by way of finance
leasing, loans from the European Investment Bank and a Bond, issued by South West
Water Plc. In addition, short term facilities exist with a range of financial institutions.

After reflecting the accounting policy change arising from the adoption of FRS 18, loans
and finance lease obligations amounted to £942m (2001 Restated £832m). Current
asset investments of £173m (2001 Restated £210m) were held at the Balance Sheet
date. Total facilities in place at 31 March 2002 but not utilised totalled £160m (2001
(£140m). These resources form part of the funding strategy put in place to finance the
future investment expenditure needs of the Company.

The Directors confirm that the Company can meet its short term requirements
from existing facilities without breaching covenants or other borrowing
restrictions.




Page: 10
Date Stamp: 4 March 2010           Time Stamp: 21:29
SWT                                             JUNE RETURN 2002


CHAPTER 3 - WATER SERVICE KEY SUPPORTING INFORMATION


Meter Options performance against OFWAT 2001 Interim Determination

We have continued to experience very high levels of meter switching, with more than
23,500 optants, 3.6% of our domestic customers, in the reporting year. This experience
is in line with allowances made in the Interim Determination

Cryptosporidium Compliance

In spite of the rural nature of the South West, and high impact of agriculture in the
Region, there have been no failures of the cryptosporidium standard. All the
installations required to meet the new cryptosporidium regulations were completed in
the year, including two new membrane filtration plants at spring water sites in East
Devon.

Lead Compliance

Phosphate dosing facilities are now in place at 2 sites and being progressed at a further
14 sites for operational use ahead of the December 2002 DWI deadline.

Water Distribution - Iron Compliance

The Company is now making progress to improve serviceability to customers and iron
compliance results demonstrate the positive effect of the water mains rehabilitation
programme. This indicator and several other related measures have improved over
successive years, as shown by the DWI‟s Operational Performance Index:

                                                1998 1999 2000 2001
DWI Operational Performance Index (OPI):        99.13 99.36 99.47 99.50
Number of tests failing for Iron:                102   86    75    59

Burst Mains

The Company has targeted the replacement of poor condition water mains in order to
reduce bursts. In the last year the number of bursts has reduced, at least in part due to
this.



Page: 11
Date Stamp: 4 March 2010          Time Stamp: 21:29
SWT                                             JUNE RETURN 2002


Guaranteed Standards of Service

The Company exceeds Ofwat‟s Guaranteed Service Standards with 8 additional
categories of events in our Customer Charter where compensation would be payable in
the event of failure and also through an enhanced GSS standard where fixed time
appointments are made.

As many of these payments as possible are made automatically, without the need for the
customer to claim payment.

SEMD Directive

Our commitment to protect customers under the Security and Emergency Measures
Direction has once again been certified by the DEFRA approved external auditor.

Water Efficiency Measures

The Company has continued to deliver a high profile water efficiency strategy. Over
32,000 people visited our „water conservation caravan‟ despite the cancellation of many
agricultural shows due to the Foot & Mouth epidemic.

The Company has been working on several initiatives in partnership with the Eden
Project, which received well over 1,000,000 visitors in its first year. These include
giving advice on the rainwater harvesting being used in the project and making the
public aware of these initiatives.

Further enhancements were made to the water conservation display at Flambards, one of
Cornwall‟s major tourist attractions with some 500,000 visitors each year.

SEWERAGE SERVICE KEY SUPPORTING INFORMATION

Drainage Area Planning

A new programme of Drainage Area Study (DAS) maintenance and new DAS work is
now underway, driven by the need to understand the maintenance requirements of our
sewerage systems. This programme has been initially focused on areas where 306
intermittent discharges require improvements during the K3 period.




Page: 12
Date Stamp: 4 March 2010          Time Stamp: 21:29
SWT                                           JUNE RETURN 2002


This programme provides the opportunity to derive significant cost-efficiencies by
covering maintenance and intermittent solution design requirements in the scope of the
DAS and also enabling holistic design of intermittent discharge solutions, rather than
tackling each discharge separately.




Page: 13
Date Stamp: 4 March 2010         Time Stamp: 21:29
SWT                                              JUNE RETURN 2002



CHAPTER 4 - EFFICIENCIES

Operating Costs

Operating efficiency savings totalling £4.0m were achieved in the reporting year,
making a strong contribution to offsetting the additional costs resulting from inflation
and the operation of new capital schemes. Significant savings were achieved in
manpower, materials and power consumption management.

Capital Costs

Our capital efficiency targets for K3 are primarily programme based, rather than being
related to specific scheme completions. We shall therefore only be in a position to
confirm the full extent of efficiencies achieved when the principal investment
programmes are nearing completion.

Where major waste water schemes are at or near completion in the report year, we
have identified savings of over £10m. The level of capital efficiencies is expected to
increase progressively over the next three years.

Echo South West Ltd

In February 2002 the Company launched a new joint venture, based at Peninsula Park
Exeter, with Echo Managed Services (a wholly owned subsidiary of South Staffordshire
Group Plc). Current customer accounts and call centre staff form the basis of the new
company, having transferred under TUPE terms.

Echo South West provides the interface with SWW customers for service and account
telephone calls, together with billing, collection and credit management under contract to
SWW. Targets are set to deliver continuing high standards of customer service, together
with the further efficiencies and staff utilisation. Supported by a skilled and enthusiastic
workforce, Echo South West will be seeking new business in related customer and
contact management contracts within the greater South West region. Success in which is
expected to enhance still further customer standards generated from a multi-client
provider.




Page: 14
Date Stamp: 4 March 2010           Time Stamp: 21:29
SWT                                             JUNE RETURN 2002



Health and Safety

We recognise that efficiencies come from maintaining and improving on our excellent
Health and Safety progress. The Company is recognised as a leader in Health and
Safety strategy and helps to plan and manage key Government campaigns. Currently,
the two core UK Health and Safety initiatives are "Revitalising Health and Safety" and
"Securing Health Together". SWW is one of only 2 UK companies cited favourably in
the "Revitalising" document, and one of only 4 UK companies referred to in the
"Securing Health Together" publication as illustrating good practice.

In 2001/02 we continued the downward trend in our accident frequency rate, achieving a
rate for all lost-time accidents of 19 per 1000 employed ( compared to an average for UK
industry of 27 accidents per 1000 employed ). The dramatic reduction in accidents
achieved since privatisation has contributed to ongoing savings.

Integrated Finance and Asset Management

Significant benefits have been realised from the first year‟s operation of the Company‟s
largest ever business efficiency project. The system facilitates improved effectiveness
and efficiency of operational and customer service work, procurement, asset
management and financial management; it also supports more effective regulatory
reporting. This has been particularly noticeable in producing this year‟s June Return.
Previously much of the data had been obtained from many different systems whereas we
now have significant access from a single source.

ISO 9001

The Company is currently preparing for ISO 9001:2000 registration covering water supply
quality (source to tap), specified waste water monitoring activities (including UWWTD/UV
and HACCP compliance) and specific developer services activities (new mains and new
connections). The support areas directly related to all of these activities will also be
subject to external assessment as part of the registration process. This is to formalise
and obtain recognition for our commitment to continuous improvement and will deliver
benefits in improved efficiency, even better services to customers and improved
compliance.




Page: 15
Date Stamp: 4 March 2010          Time Stamp: 21:29
SWT                                             JUNE RETURN 2002



Customer Management System (CMS)

Our Customer Management System project, which will deliver the “Rapid” billing
system, is well underway. This new system will replace the current legacy billing
system and will also be used to record all reportable contacts with customers. Benefits
of the new system include greater flexibility in account management and the opportunity
to redesign bills for easier customer understanding as well as significantly reduced
training time for staff. “Rapid” will also provide greater ease of data capture for
customer payment histories, enabling better selection of credit management processes
to reduce debt problems. The system is due to be fully implemented in time for
2002/03 billing.

Human Resources

A new HR data system is planned to be introduced during 2002/03 to better facilitate
the efficient utilisation of human resources, enabling greater outputs from our loyal and
competent workforce.

Following attainment of the Investors In People award, we have continued to place a
high priority on multi-skilling the workforce and improving managerial capacity through
measures including:

 increased operational efficiency from cross-skilling of craft and treatment works
  employees

 a Contractor/Vendor Management programme to help gain maximum benefit from
  effective relationships with partners and other vendors.

 focused investment on academic and practical development of our people, to provide
  an effective future manpower base in AMP4 and beyond.

Property

As a consequence of improvements being made to our infrastructure and assets, a
number of redundant properties were sold during the year. Optimisation of property
usage has included a rationalisation of office space, ensuring best value utilisation and
a reduction in costs.



Page: 16
Date Stamp: 4 March 2010          Time Stamp: 21:29
SWT                                              JUNE RETURN 2002



CHAPTER 5 - COMPETITION

In the reporting year, we have continued to provide a range of additional services to our
commercial customers, as well as those operating in the public sector and defence
industry.

A number of customers benefited from water audits carried out by SWW staff, an
activity that has also contributed to our water efficiency programme.

The Company is committed to ensuring that where customers have a choice of service
provider, they will choose SWW because of the range and quality of services they
receive.




Page: 17
Date Stamp: 4 March 2010           Time Stamp: 21:29
SWT                                           JUNE RETURN 2002



Confidentiality

We consider that Tables 6a, 30, 31, 32a, 35a, 35b, 36a, 36b, and 39 in the Return
should be classified as confidential, as disclosure of their data and the respective
commentaries to third parties would be prejudicial to South West Water‟s interests. We
request that they should remain as Commercial-in-Confidence within the „Information
Capture System‟ and should be excluded from the versions of the Return in the public
domain.

Board Endorsement

The contents of this overview are endorsed by the Board of South West Water Ltd.




R J Baty

Chief Executive

12 June 2002




Page: 18
Date Stamp: 4 March 2010         Time Stamp: 21:29

				
DOCUMENT INFO
Shared By:
Categories:
Stats:
views:16
posted:3/5/2010
language:English
pages:18